Angus VNR: Better Focus, Better Future
A leading market analyst says before cattlemen can understand today’s market path or where it may lead, it helps to appreciate where they’ve been.
“We were strictly a supply-driven market. We would overshoot the supply target, markets would break hard, supplies would drop sharply; there wouldn't be enough of it out there, prices would go straight up, and we'd do that old boom-and-bust thing that, honestly, didn't serve anybody very well as we came through that time period in the late '70s through the '80s and '90s. I think when you step back and you look at it, yeah, we lost several producers by the time we got into 2012; most of those we lost from 2008 to 2012 just because of the magnitude of the drought. But look how things have stabilized,” says Randy Blach, CEO of CattleFax.
Blach credits a strong producer response to consumer price signals, and though a few ripples remain, the move to higher quality supports that stability.
“Understand that margin is in the industry. We don't have to go build demand. It is already there. So, as we balance supply and demand out here, as we balance, we increase harvest capacity or we decrease the number of animals that are moving through the system, this will be a situation that this will ebb and flow, and it will start to balance back out in here over the course of the next several years,” he says. “We've seen these premiums stay strong all the way through here because more and more consumers, once they taste the good stuff, they want to stay with it, don't they? So this has been a quality movement.”
The entire U.S. meat industry should grow annual production with greater quality, but cow-calf producers stand to benefit more when that growth stimulates expansion in the beef packing sector.
“Today we're at 100 billion pounds of beef, pork, and poultry production. If we assume trendline growth, this would suggest we would have an industry that's producing closer to 150 billion pounds of product by the time we get to 2040. The cow-calf producer needs to be more profitable. The good thing is the profitability is in our industry, but we need a little more harvest capacity to balance who is getting what share of that in here today,” he notes.
Blach challenged producers to maintain the consumer focus that lifted them from the dimmer outlook of a decade ago.
“Are we prepared to continue to make the strides, some of the same hard decisions we made 15 and 20 years ago, focused on quality... are we going to be willing to do that as move forward, to where we can increase our global market share and presence? We can't play the commodity game. We have to continue to focus on these high-quality products, and we'll win,” Blach says.
